SmartHomeOwners

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic outlook has deteriorated in recent weeks as several downside risks to the projection in the Bank’s July Monetary Policy Report (MPR) have been realized. The European sovereign debt crisis has intensified, a broad range of data has signalled slower global growth, and financial market volatility has increased sharply. Recent benchmark revisions show that the U.S. recession was deeper and its recovery has been shallower than previously reported. In combination with recent economic data, this implies that U.S. growth will be weaker than previously anticipated. The Bank expects that American household spending will be even more subdued in the face of high personal debt burdens, large declines in wealth and tough labour market conditions. Fiscal stimulus in the United States will also soon turn into material fiscal drag. Acute fiscal and financial strains in Europe have triggered a generalized retrenchment from risk-taking and could prompt more severe dislocations in global financial markets. Resolution of these strains will require additional significant initiatives by European authorities. Growth in emerging-market economies has been robust, although its rate and composition will be affected by weakness in major advanced economies. While commodity prices have declined owing to diminished global growth prospects, they remain relatively high.

Largely due to temporary factors, Canadian economic growth stalled in the second quarter. The Bank continues to expect that growth will resume in the second half of this year, led by business investment and household expenditures, although lower wealth and incomes will likely moderate the pace of investment and consumption growth. The supply and price of credit to businesses and households remain very stimulative. However, financial conditions in Canada have tightened somewhat and could tighten further in the event that global financial conditions continue to deteriorate. Net exports are now expected to remain a major source of weakness, reflecting more modest global demand and ongoing competitiveness challenges, in particular the persistent strength of the Canadian dollar.

Slower global economic momentum will dampen domestic resource utilization and inflationary pressures. The Bank expects total CPI inflation to continue to moderate as temporary factors, such as significantly higher food and energy prices, unwind. Core inflation is expected to remain well-contained as labour compensation growth stays modest, productivity recovers, and inflation expectations remain well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.

Next scheduled rate update is on October 25, 2011.

Statistics Canada reported that the Canadian economy contracted unexpectedly in May, led lower by the mining and oil and gas sector. The country’s gross domestic product fell 0.3% during the month, following a flat performance in April and a 0.3% increase in March. Most economists had expected an advance by between 0.1 and 0.2% in May. This is not good news for Canadians looking for jobs.

South of the border, the U.S. economy grew less than expected in the second quarter as consumer spending barely rose and growth braked sharply in the prior quarter. GDP in U.S. rose at a 1.3% annual rate. Economists h ad expected a 1.8% increase in GDP in the second quarter. With the U.S. Treasury stating that the government will soon run out of money to pay all its bills, the fragile recovery is in greater danger. This will also impact other economies worldwide negatively.

Walmart employs over 2.1 million people. There are 8,500 stores around the world. More than 200 million customers visit the store every week.

But less than 50 years ago there was just a five-and-dime store, and Sam Walton was an entrepreneur who couldn't find backers for his dream of a discount mega chain.

Here is the short story:

Click here to the Story.

This is a surprise to most economists!

The U.S. economy added only 18,000 jobs in June. Many has forecasted adding 105,000 jobs in June. Here are the dark sides:

• June job creation is the weakest in nine months
• The overall unemployment rate has climbed to 9.2%, highest since last December, 2011
• May non-farm payrolls revised down to 25,000
• Downward revisions of 44,000 for both April and May
• Private sector added only 57,000 jobs
• Government employment is shrunk by 39,000
• Wage growth up only 1.9% year over year; excluding inflation wages are actually declining 
• 12,000 decline in temporary jobs
• Household survey measure of employment shows 445,000 drop, most since December 2009
• Participation rate at 27-year low of 64.1%
• Average hours worked down to 34.3 from 34.4
• Average duration of unemployment a new high at 39.9 weeks
• All-in jobless rate, including underemployed and discouraged job seekers back above 16%.

Where does the U.S. economy go from here? How is this going to affect Canadian growth?

In a news release by TD Bank today, TD expects that the Bank of Canada will not raise the overnight rate this year.

Today, TD Economics released its Quarterly Economic Forecast (QEF) publication, providing updated macroeconomic and financial forecasts for the global, U.S. and Canadian economies. The adjustments to the economic projections for Canada were minimal, but there was a major adjustment in the outlook for monetary policy and interest rates. TD Economics no longer expects the Bank of Canada to raise the overnight rate this year. Instead, the tightening of monetary policy is now anticipated to begin in early 2012, with the overnight rate climbing to only 2.00% by the middle of the year. While the rationale for this forecast is laid out in the QEF, it is worth explaining in greater detail.  Here are the highlights:

1. TD Economics no longer expects the Bank of Canada to raise interest rates this year.
2. The tightening of monetary policy is expected to begin in January 2012, and the overnight rate is only expected to increase to 2.00% next year. The Bank of Canada is then projected to raise the overnight to 3.00% in 2013.
3. This delayed and slow rebalancing of monetary policy reflects the risk-filled economic environment, which has reduced confidence in model-based
   economic projections that predict a closing of the output gap in mid-2012. It also reflects the possibility that there is more slack in the economy and that the ‘neutral’ level of interest rates may be lower than  previously thought.
4. Well anchored inflation expectations provide the Bank of Canada with additional flexibility to delay tightening policy until the economic uncertainty diminishes.
5. With the U.S. Federal Reserve on hold, the Bank of Canada is also constrained in raising interest rates, as widening interest rate spreads would boost the Canadian dollar that is already above parity.